HOTEL MARKET PLACE
2010 has stated on a positive note. Our telephones have rung and there
appears to be enquiry to purchase hotels.
We are now in a buyer's market ... where the purchaser
decides price! There are a number of key factors effecting price:
Hotel Profitability: A vendor needs to provide up to
date financial information, demonstrating the ACTUAL (not potential)
business profitability and its future sustainability.
Hotel Presentation: Purchasers want everything ... TAB,
glycol bulk beer system, modern furnishings, large flat screen T.V's,
Poker Machines Entitlements, outdoor areas.
Owners Unit: Many decisions are made by the female
partner .... With one of the most important being; Yes I can live here!
Expectations are fully self-contained, modernised with space.
Location: Not just overlooking the beach, how much
competition, how far from family facilities such as schooling?
Poker Machine Entitlements: Purchasers want to minimise
the goodwill component of the value. The more machines for a lower price
Conservative prices are further reinforced by a steady flow of
receivership sale occurring in the market place. Values have returned to
the traditional levels.
The Freehold Hotel market place has broken into a number of sub-markets
with each having their own determinants of price.
These markets can be roughly described as follows:
a)Hotels without gaming machines.
b)Freehold hotels to $1.5m with Poker Machine
entitlements underpinning the value. (property = asset value NOT business
c)Freehold Hotels to $4.5m where value is
directly related to Business Profitability. (Gaming machine numbers are
still important yet price is determined by overall hotel
d)Premium freehold properties (generally in
excess of $5m) sought after by corporate style purchasers.
The market appears to be valuing PME's at approx. $100,000 per machine
(as they are for single country transfers) despite the current block (3)
of PME's to the city fetching approx. $240,000 and $200,000 for the
During the last 18 months there have been a number of properties placed
on the market at levels above their achievable price. The market place is
rejecting these properties and in fact damaging the perception of these
properties even when a price reduction has occurred.
Purchases for hotels in the (b) and (c) markets have in the majority been
local or have knowledge of that particular hotel. Many of the potential
purchasers are guided by experienced hoteliers who sold their properties
during the last few years and believe that opportunities will exist to
purchase hotels at returns close to "bargain" prices.
Sales are now only beginning to filter through. There were few sales in
the later month of 2009.